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Protecting Local Industries: Pains & Gains

Nageswaran Sairam, IIK Young Contributor
Thursday, January 21, 2021
Protecting Local Industries: Pains & Gains

Local industries are the ones which produce items locally with the raw materials available locally. In rural areas, the business operates towards different industries like agriculture, forest and handloom industries.

They are being protected in our country with tariffs, subsidies, quotas and standardisation. This is known as protectionism. An economy usually adopts protectionist policies to encourage domestic investment in a specific industry. The contribution of small industries and business to the Indian economy is immeasurable. In fact, they are very important that the there is a special ministry for protecting micro, small, and medium industries. So, let us learn how our government protects these industries.

1.Both central and state government are providing help and support in financing like providing loans with less interest, training programs for them, infrastructure, raw materials, and technology.

2.The support of the government also includes: -

•Institutional Support

1.National Bank of Agriculture and Rural Development

2.A Rural Small Business Development Centre

3.National Small Industries Corporation

4.Small Industries Development Bank of India

5.The National Commission for Enterprises in the Unorganized Sector

6.Rural and Women Entrepreneurship Development

7.World Association for Small and Medium Enterprises

8.Scheme of Funds for Re-generation of Traditional Industries

•The programs and schemes vary from state to state. Together they form a package that attracts industries in local areas. They provide them land, water, power, sales tax, octroi, raw material and industrial estates.

•For farmers, MSP (Minimum Support Price), an agricultural product price is set by the Indian Government. This rate is set to safeguard the farmer to a minimum profit for a certain amount of harvest, if the open market has lesser price than the cost for that harvest.

•India is diligent in the framework of World Trade Organisation of protecting local industries as it is one of the founder members.

But have you ever thought that what are the gains & pains in protecting local industries?

The major problems for local industries are: -

1.Lack of adequate finance

2.They use only raw materials available nearby. But the large industries buy raw materials from outside and increase production.

3.Idle Capacity in Machines: Local industries mostly don’t use the full capacity of the machines they have as they work for less hours with less raw materials comparing to large industries.

4.Lack of advanced technology: As these industries are mostly situated in remote villages, educated people do not prefer to work there and the workers there are not aware of advanced technologies. So, they are unable to compete with large industries.

5.Same problem with Marketing also as they don’t know the market pulse.

6.Lack of proper Infrastructure

7.No Project Planning

8.Lack of Skilled Manpower

9.Lack of Managerial Skills

Because of the above factors the production will be very less in local industries and quality and finishes will not be up to the mark to compete with large industries. If the production is less than even local demand, government has to depend upon exports.

When these industries are getting government support, many of them are not ready to take risk by increasing their production or investing more in marketing. They are not trying to improve quality or change the product or try an improvement because they feel satisfied with the support they are getting and are scared that they may lose if they invest more.

Since there is no competition, the entrepreneurs don’t think innovatively and make the same products repeatedly.

Protectionist policies can result in the limitation of the choice of the consumer. It also results in the decline of quality of the products manufactured.

So, the government should make the policies in a way that these industries will get additional support when they show progress because sometimes the policies made to encourage these industries are indirectly making their growth like Bonsai trees.

There are many gains in protecting local industries like: -

•The protection of local industries provides local industries growth opportunities until they can compete with more experienced industries in the international markets.

•Higher employment rates will be the result when domestic industries boost their workforce. So, it will provide many job opportunities to the public. As we know that many people are jobless, the protectionist policies to protect local industries will help them get a job.

•The protectionist policies of the government will help in the development of that area like if many people are working there, they will start to settle there, it will cause the area to develop. So, like this a township will be developed in the area where the industry is developed.

•It increases the trade balance of our country by increasing the amount of export of products manufactured in these local industries and decreasing the need of import of goods from foreign countries.

•It increases the country’s GDP (Gross Domestic Product) due to a rise in the domestic production.

So, if the local industries are supported in a proper way and if they really grow, it will result a big growth in countries economy as well and the country will be self sufficient in long run. Import will be less and export will be more. If India uses its resources properly, no other countries can even compete with us.

Happy Republic day to all!

Nageswaran Sairam
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Disclaimer:Statements and opinions expressed in the article are those of the authors and written by them; the author is solely responsible for the content in this article. does not hold any responsibility for them.
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